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Pursuant to a congressional request, GAO reviewed Medicare's managed care beneficiary appeals process, focusing on: (1) the appeals process available to beneficiaries when managed care plans deny care or payment for services; (2) beneficiaries' use of the appeals process and the extent to which they are informed of their appeal rights; and (3) the Health Care Financing Administration's (HCFA) oversight of this process.

GAO noted that: (1) Medicare beneficiaries enrolled in managed care plans have the right to appeal if their plans refuse to provide health services or pay for services already obtained; (2) upon receipt of the written denial notice, the beneficiary may appeal and the health plan must reconsider its initial decision; (3) if the plan's reconsidered decision is not fully favorable to the beneficiary, the case is automatically sent to the Center for Health Dispute Resolution (CHDR) to review the decision; (4) CHDR may overturn or uphold the plan's decision; (5) a beneficiary is entitled to an expedited decision from the plan, both on the initial request and on appeal, if the standard time for making the decision could endanger his or her health or life; (6) a beneficiary who is dissatisfied with CHDR's decision may appeal further to an administrative law judge and then to a U.S. District Court provided certain requirements are met; (7) health maintenance organizations (HMO) reported an average of approximately 9 appeals per 1,000 Medicare members annually between January 1996 and May 1998; (8) HMOs reversed their original denial in about 75 percent of appeal cases; (9) the number of appeals may understate beneficiaries' dissatisfaction with the initial decisions by HMOs for two reasons: (a) some beneficiaries may disenroll and switch to another plan or fee-for-service Medicare instead of appealing; and (b) some beneficiaries may not appeal because they are unfamiliar with their appeal rights or the appeals process; (10) GAO found that beneficiaries frequently received incomplete notices that failed to explain their appeal rights, and some beneficiaries did not receive any notices; (11) notices often do not state a specific reason for the denial; as a result, beneficiaries may be uncertain as to whether they are entitled to the requested services and thus discouraged from appealing; (12) GAO also found that beneficiaries may receive little advance notice when plans decide to discontinue paying for services, which places these beneficiaries at financial risk should they decide to continue treatment during their appeal; (13) beneficiaries who lose their appeals are responsible for the treatment costs incurred after the date specified in the denial notice; (14) the agency does not determine whether beneficiaries who were denied services but did not appeal were informed of their appeal rights, nor does it monitor provider groups that contract with health plans; and (15) HCFA has not used available information to develop more effective plan oversight strategies.

Recommendations for Executive Action

Status: Closed - Not Implemented

Comments: CMS hired PriceWaterhouseCoopers to develop a strategy to identify and monitor Medicare+Choice Offices (M+CO) that may need to improve their performance in areas related to the appeals process. PriceWaterhouseCoopers will develop a formula that uses CAHPS and independent review entity data to identify M+COs to monitor a tool (electronic and manual) to implement the monitoring strategy, and a short survey to followup with a few (no more than nine) beneficiaries enrolled in each identified M+CO. As of September, 2002, PriceWaterhouseCoopers has not issued its final report to CMS. In Spring 2008,CMS indicated that M+C is no longer a program. As a result we are closing this recommendation as not implemented.

Recommendation: To improve HCFA's monitoring of the appeals process, the Administrator, HFCA, should use the data HCFA collects during plan performance reviews to assess the relative performance of plans, and develop strategies for better plan monitoring and program management.

Comments: CMS reviews random samples to determine if Medicare+Choice Offices (M+CO) correctly provided appeals rights to beneficiaries when requests were denied. CMS updated the M+C Monitoring Guide in November 1999, to include a worksheet with a column to record whether the correct appeals language was provided to a beneficiary when a claim was denied. In addition, CMS reviews a random sample of M+CO grievances that could indicate if an M+CO is not providing correct appeal rights to beneficiaries.

Recommendation: To improve HCFA's monitoring of the appeals process, the Administrator, HCFA, should require agency staff conducting performance reviews to sample a number of denied cases that were not appealed to determine whether beneficiaries were informed of their appeal rights.

Comments: CMS changed the Medicare+Choice (M+C) Monitoring Guide in November 1999, to include program requirements pertaining to delegation (42 CFR 422.502(i)(4)). These regulations (1) make M+COs accountable for any function delegated to an outside entity, (2) require entities performing delegated functions to sign a written agreement which specifies the activities and reporting responsibilities, (3) require M+COs to evaluate an entity's ability to perform the delegated activities prior to delegation, and (4) requires M+COs to monitor entities performing delegated functions. During monitoring visits to M+COs, CMS randomly samples and reviews case files pertaining to organization determinations, reconsiderations for expedited and standard cases, and appeals. These samples may include cases in which a delegated provider group was responsible for informing beneficiaries of their appeal rights. If CMS suspects that a particular entity performing delegated functions is having problems with appeals-related items, agency staff will generally examine a distinct random sample of cases from that entity to assess its performance.

Recommendation: To improve HCFA's monitoring of the appeals process, the Administrator, HCFA, should require each plan to collect sufficient information from its provider groups so that HCFA staff can, during the course of a normal biennial performance review, determine whether the plan and its provider groups satisfactorily implemented the required appeals process.

Comments: Criteria and timeframes for determining how and when an appeal should be expedited by an HMO are contained in regulations. During 2001, CMS began releasing chapters of a new Medicare managed care manual intended to inform HMOs about program requirements. Chapter 13 of the manual has been released and explains organization grievances and appeals.

Recommendation: To help ensure that the appeals process provides adequate protection to Medicare beneficiaries, the Administrator, HCFA, should develop criteria for plans to use in determining when initial decisions and appeals should be expedited.

Comments: CMS published a final rule on April 4, 2003 establishing timeliness requirements for denial notices.

Recommendation: To help ensure that the appeals process provides adequate protection to Medicare beneficiaries, the Administrator, HCFA, should set specific timeliness standards for certain types of denial notices, such as discontinued skilled nursing facility care services, to allow beneficiaries reasonable time to obtain an expedited appeal decision.

Recommendation: To help ensure that the appeals process provides adequate protection to Medicare beneficiaries, the Administrator, HCFA, should provide more explicit denial notice instructions to plans. Denial notices should explain the coverage criteria and state the specific reason or reasons why the beneficiary did not meet the criteria.

Comments: HCFA has issued an OPL that would implement this recommendation on January 27, 2000.

Recommendation: To ensure that appeals data are available to HCFA and Medicare beneficiaries, the Administrator, HCFA, should develop requirements for the type and format of appeals data plans must collect and make available.